Category Archives: Project Management

Lean Tools – Overall Equipment Effectiveness OEE –darronrobertsconsulting

In these troubled times for business, there is a need to reduce the costs associated with running the business.  If we take a Middle Eastern regional example, 60% of the manufacturing cost is raw materials, 30% is overheads and 10% is direct wages.  If the cost of the overheads or fixed cost is $10,000 per month and you produce 1000 units, then the fixed cost per unit is $10.  If you produced 4000 units per month, the fixed cost would still be $10,000 per month, but the fixed cost per unit would have reduced to $2.50.  You would have the increase in variable costs associated with increase in production and you would also have the increase in sales revenue and profit!  The increase profit on fixed cost alone is $30,000 in one month!

So how do we measure efficiency?  The best method is to use Overall Equipment Effectiveness or Efficiency as some term it, OEE.  This is a powerful driver for change, it is not the only one, but it is a very powerful one.  As we have seen it is linked to profit.  It should be linked to capital expenditure.  If the OEE value is not in the 70% range, why buy expensive new capacity over working, at a cost, but a lower cost than CE to improve the current value stream and make it efficient.  In my opinion it should form part of the job description and more controversially it should be a driver for the remuneration package.

OEE is one of the basic key performance indicators, KPI, that every business should monitor as increasing it and sustaining in requires the whole operation to perform as a team, not as individual functions or managers.  Maintenance, Production and Quality functions all have their role to play in this measure.

OEE looks at how you use the planned operation time in terms of availability, productivity and quality of the value stream.  This can be expressed as:

OEE = Availability x Productivity x Quality.

Let us quickly define these terms.  A company plans to work for 24 hours per day, to run four different products. For each of the products there is a tool change, each change over from good part to good part takes 144 minutes.  The operation was designed to run at a Takt time of 500 units per hour, the current rate is 320 units per hour.  From what is produced there are on average 26 quality rejections per hour.

Availability is the time that the process is actually operating, there are two big losses involved in reducing the availability time, recorded breakdown time and set up and adjustment time.

The available time is the (planned time – down time)/ planned time x 100.

In our case ((24 x 60) – (4 x 144))/ (24 x 60) x 100 = 60%

Giving 864 operating minutes out of 1440, or 14.4 hours out of 24. This is Operating Time.

Visual Example of OEEProductivity is the rate of operation or speed of the operation.  The two big losses in this category are unrecorded small downtimes of less than 5 minutes, called idling losses and increasing cycle times or operating slower than the required rate.

The productivity is number produced / number planned x 100

In our case 320 / 500 x 100 = 64%

Out of the 14.4 hours of Operating Time we effectively used only 64% of it, giving us 9.2 out of 24 hours of Net Operating Time.

Quality is defined as the “good” product produced during the Net Operating Time.  In our case some of the valuable time was taken up producing out of spec product! There are the final two big losses here in process scrap and start up scrap.

Quality is (Number produced – number of bad quality) / number produced x 100

In our case (320 – 26)/320 x 100 = 92%

Of the 9.2 hours of Net Operating Time there is only 8.5 hours of Valuable Operating Time from the planned 24 hours!

OEE = Availability x Productivity x Quality

OEE = 60% x 64% x 92% = 35%

This means that 35% of your time is adding value, 65% of your time is non-added value, 8.5 hours of added value 15.5 hours of non-added value!

The world class bench mark for OEE is 85%.  This is not sweating the process, but inputs enough pressure to keep employees alert.  There are times included for change overs, maintenance, training and customer order flexing.

The World Class benchmark OEE = Availability x Productivity x Quality = 90% x 95% x 99% = 85%

So now you have calculated your OEE, what do you do?  Use the six big losses to pinpoint where the problems in the value stream are.  For manual operations the problems are normally organisation and training; for automated processes they are normally change overs and maintenance.  Use the Lean Tools, VSM,5S, 7 Wastes, Visual Control / Visual Management, Standardised Work, SMED – Quick Changeovers and TPM – Total Preventative Maintenance to reduce the wastes and improve the business.  This will increase the quality and delivery levels given to you customers while reducing your internal costs.

This like most of my posts is a brief  introduction / overview of a part of Lean Manufacturing.  For more information, leave me a comment or email me.


Difficulties of Managers Becoming Coaches–

There have been many comments on my blog articles about the need for operators to become change agents during the Lean Manufacturing Transformation.  All of which I fully support and subscribe to.

People are the company’s most valuable assets, not the shiny new machine or swanky new IT system.  Without the involvement of the people in the area of the change from very early on, the likelihood is that the intended change initiative will fail.  The reasons for this are very obvious, none of us really likes being told what to do, how to do it or when to do it.  After the initial high profile period, many initiatives, revert back to where they were, the people are in their comfort zone and management resign this initiative to another failure, label the people and unchangeable and try to implement another initiative in exactly the same way!

If on the other hand, after you have recognised the need for change and planned a change project, set the project definition and identified the project goals, when it is time to start the change process, communicate the project properly to everyone.  I insist on both written and oral communications, so that people can ask questions, allay their fears and be reassured about their security.  Which are the real underlying fears of any new initiative.  I give a project kick off meeting for senior managers, a separate one for middle managers and then a specific project kick off meeting for each kaizen team.  I get operators into the project as early as possible, facilitate the action meetings for a few times to make sure that all voices have equal say and that all team members have parity, whether they are senior managers or operators in the company.  This is a big factor in the success of all of my projects.

That said, the lower down the organogram the employee the more encouragement they need to make their ideas heard, after all, they are the ones who actually make the product or enter the data into a system!  They are the ones that we want to own the process and these are the ones who we want to actually implement the change.

Herein lies the problem the managers!  The managers want to be everything in the change process.  They want, in fact they might even need, to show their superiors, the consultants and their subordinates their knowledge and management skill.  By doing this they are curtailing the creative effort of others.  It is the responsibility of the management consultant to change the role of the manager in the project from a manager to one of a coaching and supporting leader.  Their superiors already know their capabilities, that is why they have employed them, what they want now is for them to step up to the mark, clichés again and get the best out of the people who work for them.

I have faced this problem in nearly every project I have been involved in.  It is difficult to get a manager to change their role, months in fact, but when they see that they get results that they have not achieved in the past and they are getting accolades for leading the project and not doing the project, then perceptions do change.

The underlying fact is that some people are in positions where they don’t have the training or experience to fully undertake the role they are filling and where the company doesn’t realise there is a problem because they are profitable.  This profitability hides many problems and is accepted until there is a crisis that prompts action.  This observation is backed up by the research that I did for the dissertation of my MBA.  I was researching why British Engineering companies fail to employ modern manufacturing methods, but this can be mapped over to other change projects.

Myopia – “Can’t see the wood for the trees” – darronrobertsconsulting

Following on from the last couple of posts regarding Lean Manufacturing and the basic building blocks of a Lean Manufacturing  transformation, today I want to discuss the myopia the descends over people when they are in an operations environment.  Since I have been writing this blog I have started using clichés.  I have tried to stop myself using these, but then I have thought about them.  What are clichés? They are well used expressions, so well used we actually now miss the meaning of them, so on reflection I am going to keep using them because they put over the message and work!

“Can’t see the wood for the trees” is the cliché that I am using to point out the wastes that occur every day in operations, but they are wastes that are accepted, they have become a “comfort” and almost necessary.  I will give the “comfort” and necessary terms some explanation.  When I first started in operations I was working in the steel industry, on the cold side, taking raw materials, hot rolled products and turning them into semi-finished products.  Steel, while being a commodity, is still an expensive commodity. The operators felt comfort in knowing that they had at least four days worth of input material in front of their machines, it was necessary for them to know they had plenty of work ahead of them.

What they did not see was the waste in having four days worth of input material in front of them.  The coils were quite large three to five tonnes in weight, which translates to large volumes when we are talking about twenty processes.  Not only were there large sums of money tied up in the material, which adversely affects the cash flow cycle, there was the waste of having to store this material, the space was not adding value and actually costing in rates and maintenance.  There was the waste of transportation, with the coils having to be moved and restored to get the coil that was required.  Also the waste production idle time, in having to find the correct coil along with the excess movement of people away from their process to retrieve the coils.   To be efficient, the larger the coil the better, less downtime due to chageovers, less waste!  Actually overproduction and more waste when there were finished offcuts due to customer specifications that needed to be stored and because the processing time was longer it put back other orders that could have been produced and paid for, not to mention the cost of the raw material.  If there was a problem the problem would be exacerbated because of the size of the coils.

So let me introduce the Lean manufacturing tool the 7 Wastes – The Second Building Block of Continuous Improvement. The 7 wastes are not a tool in themselves to tackle the problems within an organisation; they do play a valuable role in identifying the inefficiency and therefore the ability to find and eradicate the root causes of the problems.  Lest put on our “Waste Goggles   and start seeing the wastes around us”.


The main causes of overproduction are unbalanced processes in the value stream and the paradigm of the business to maximise utilisation.  The focus is on sweating the assets not maximising value!

Often caused by quality problems; a company knows that it will lose a number of units along the production process so it produces extra to make sure that the customer order is satisfied.  These kinds of issues can be tackled using mistake proofing methods (Poke Yoke) and by understanding the machine process capabilities of the production equipment.  Statistical process control (SPC) will also help monitor production outputs and give warning of problems before they occur.

If the reason a company is overproducing is because of small orders and economic batch sizes then setup reduction techniques such as Single Minute Exchange Dies (SMED), can help.  Reducing changeover times means it is then able to produce smaller batches economically.

Overproduction is the worst of the 7 Wastes as it encompasses all of the rest of them, often it is the main driving force in Lean Manufacturing transformations for creating process flow.  It is the worst waste because on average sixty percent of the manufacturing cost is made up from the material content and as such is the largest company waste.

Idle Time

Products or processes waiting around either as finished goods; work in progress (WIP) or downtime is another major cause of waste.  WIP is commonly caused by producing large batch sizes where again SMED techniques can help to reduce these batch sizes.  Concentrating on keeping bottle neck processes working and solving the problems to balance all of the processes in the value stream will result in reducing idle time.  Waiting is a symptom of overproduction; on the basis that if it was produced as it was needed it would not be waiting for the next process or final customer.

Do not confuse unplanned idle time with planned idle time.  Although if there is an amount planned idle time, this is also a waste and the company needs to respond by increasing demand on the operation through increased sales.


Factory layouts are the fundamental cause of excess transportation.  When appropriate, re-laying out the machines within a factory; so that all of the processes are next to each other will not only reduce transportation waste but also reduce WIP and waiting.  Excess inventory levels can also lead to wasted handling as described earlier.


A very misunderstood waste, that of performing work on a product of service that the customer does not see as value and which is a cost to the business. Performing unnecessary or incorrect processing. Inspections or rectifications are required because there is excess variation in the process compared to product specification, either through the design of the process or subsequent lack of maintenance, producing poor quality or there are too many steps in the process route that are producing an over engineered product or service for the customer.  Remember to specify value – from the customers point of view, give them what they want; not what you think they want! Total Preventative Maintenance and Six Sigma projects are the remedy for this waste.


Many companies order over and above what is required to fulfil the order, this may be due to quality problems along the process or the often mistaken belief that is saves money by ordering larger quantities.  The true cost of excess inventory levels should be carefully analysed before ordering excess raw materials simply because the purchase price is less. Tackling the root causes of the quality problems should be a priority.

 Operator Motion

Operators making movements that are straining or unnecessary; such as looking for materials; tools or documents etc. are a waste!  In a well-designed workstation the operator will not need to move further than one pace or over reach with their arms to complete their task.  The 5S tool helps to design the work areas and reduce this excess motion.

Poor Quality

Variation in the process produces products or services that require inspection and rework or scrap being produced. Even worse product at the customer that is outside specification.  The root causes need to be identified and eliminated using Six Sigma techniques.  Bad quality is endemic in excess inventory, which as described earlier is very wasteful!

So how do we address all of these wastes?  Now that the wood has been identified from the trees, the myopia has been reduced with the 7 Wastes tool, put on your waste goggles and go on a “Waste walk” and record all of the non-value added activities carried out in a your company.  Start a waste register and systematically reduce all of the company wastes.

Do not be surprised to find out that 95% of all activities carried out are non-value adding, that means the customer is only paying for 5% of your operation. The elimination of waste is vital to increasing the competitiveness and therefore longevity of your company.

If you want to make a bigger impact within the company with regard to reducing waste. Just replace the word waste with the word COST!